- You Are The 98%
- Infographic Marketing: Better Creation, Better Promotion
- Web Analytics Review
- What caused the financial crisis? The Big Lie goes viral.
- 10 Weekend Reads
- Amazing 3D Facade Show in Berlin
- Lie Spotting: How to spot a liar
- CDS, Market Turmoil, Asset Allocation
- How to Honor Veterans on Veterans’ Day
Posted: 12 Nov 2011 03:30 PM PST
Here is an excerpt:
The full piece is worth exploring . . .
Posted: 12 Nov 2011 12:00 PM PST
Posted: 12 Nov 2011 11:30 AM PST
I am a sucker for a good infographic: Check out this one from Search Engine Journal:
Posted: 12 Nov 2011 08:00 AM PST
What caused the financial crisis? The Big Lie goes viral.
I have a fairly simple approach to investing: Start with data and objective evidence to determine the dominant elements driving the market action right now. Figure out what objective reality is beneath all of the noise. Use that information to try to make intelligent investing decisions.
But then, I'm an investor focused on preserving capital and managing risk. I'm not out to win the next election or drive the debate. For those who are, facts and data matter much less than a narrative that supports their interests.
One group has been especially vocal about shaping a new narrative of the credit crisis and economic collapse: those whose bad judgment and failed philosophy helped cause the crisis.
Rather than admit the error of their ways — Repent! — these people are engaged in an active campaign to rewrite history. They are not, of course, exonerated in doing so. And beyond that, they damage the process of repairing what was broken. They muddy the waters when it comes to holding guilty parties responsible. They prevent measures from being put into place to prevent another crisis.
Here is the surprising takeaway: They are winning. Thanks to the endless repetition of the Big Lie.
A Big Lie is so colossal that no one would believe that someone could have the impudence to distort the truth so infamously. There are many examples: Claims that Earth is not warming, or that evolution is not the best thesis we have for how humans developed. Those opposed to stimulus spending have gone so far as to claim that the infrastructure of the United States is just fine, Grade A (not D, as the we discussed last month), and needs little repair.
Wall Street has its own version: Its Big Lie is that banks and investment houses are merely victims of the crash. You see, the entire boom and bust was caused by misguided government policies. It was not irresponsible lending or derivative or excess leverage or misguided compensation packages, but rather long-standing housing policies that were at fault.
Indeed, the arguments these folks make fail to withstand even casual scrutiny. But that has not stopped people who should know better from repeating them.
The Big Lie made a surprise appearance Tuesday when New York Mayor Michael Bloomberg, responding to a question about Occupy Wall Street, stunned observers by exonerating Wall Street: "It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp."
What made his comments so stunning is that he built Bloomberg Data Services on the notion that data are what matter most to investors. The terminals are found on nearly 400,000 trading desks around the world, at a cost of $1,500 a month. (Do the math — that's over half a billion dollars a month.) Perhaps the fact that Wall Street was the source of his vast wealth biased him. But the key principle of the business that made the mayor a billionaire is that fund managers, economists, researchers and traders should ignore the squishy narrative and, instead, focus on facts. Yet he ignored his own principles to repeat statements he should have known were false.
Why are people trying to rewrite the history of the crisis? Some are simply trying to save face. Interest groups who advocate for deregulation of the finance sector would prefer that deregulation not receive any blame for the crisis.
Some stand to profit from the status quo: Banks present a systemic risk to the economy, and reducing that risk by lowering their leverage and increasing capital requirements also lowers profitability. Others are hired guns, doing the bidding of bosses on Wall Street.
They all suffer cognitive dissonance — the intellectual crisis that occurs when a failed belief system or philosophy is confronted with proof of its implausibility.
And what about those facts? To be clear, no single issue was the cause. Our economy is a complex and intricate system. What caused the crisis? Look:
Bloomberg was partially correct: Congress did radically deregulate the financial sector, doing away with many of the protections that had worked for decades. Congress allowed Wall Street to self-regulate, and the Fed the turned a blind eye to bank abuses.
The previous Big Lie — the discredited belief that free markets require no adult supervision — is the reason people have created a new false narrative.
Now it's time for the Big Truth.
Posted: 12 Nov 2011 05:00 AM PST
These are the long form reads I simply did not get to this week. They are my weekend reading:
What’s on your Instapaper?
Posted: 12 Nov 2011 04:45 AM PST
Posted: 12 Nov 2011 04:00 AM PST
On any given day we’re lied to from 10 to 200 times, and the clues to detect those lie can be subtle and counter-intuitive. Pamela Meyer, author of Liespotting, shows the manners and “hotspots” used by those trained to recognize deception — and she argues honesty is a value worth preserving.
Social media expert Pamela Meyer can tell when you're lying. If it's not your words that give you away, it's your posture, eyes, breathing rate, fidgets, and a host of other indicators. Worse, we are all lied to up to 200 times a day, she says, from the white lies that allow society to function smoothly to the devastating duplicities that bring down corporations and break up families.
Working with a team of researchers over several years, Meyer, who is CEO of social networking company Simpatico Networks, collected and reviewed most of the research on deception that has been published, from such fields as law-enforcement, military, psychology and espionage. She then became an expert herself, receiving advanced training in deception detection, including multiple courses of advanced training in interrogation, microexpression analysis, statement analysis, behavior and body language interpretation, and emotion recognition. Her research is synthetized in her bestselling book Liespotting.
Posted: 12 Nov 2011 03:30 AM PST
CDS, Market Turmoil, Asset Allocation
Let us consider this week's credit default swap (CDS) debacle in the following manner. People purchased CDS with the understanding that they had a type of insurance policy against the default of a sovereign debtor. Now they have learned that what they thought they had is something they do not have. The European Greek debt deal and the International Swaps and Derivatives Association, www.isda.org (ISDA) have clarified that.
What do they do? They must realign their positions. First, they have to face the reality that they were misinformed or misadvised. They must accept that their position has changed. Second, they must take action.
The spike in yields on sovereign debt of Italy was attributable, only in part, to the Italian political turmoil we are witnessing. The other aspect dealt with CDS on Italian debt. Those holders thought they had one type of CDS protection. They realized from the events in Greece that they had something else.
This is true of other sovereign CDS as well, and this change has roiled the markets. Interest rates have risen as bond prices have fallen. The cost of finance for Italy has gone up to levels that are deemed unsustainable. This is what one would expect with CDS realignment.
Does that mean the world is ending? No. In fact, there is a considerable possibility that the current stock market rally has the outlook correctly discounted, after this turmoil runs its course. If you examine Italy's budgetary characteristics, you realize the country is headed for a primary surplus in 2013. "Primary surplus means after you deduct interest payments."
Will Italy be able to complete the plan? Will they be able to implement it? What is going to happen? What about other exogenous shocks? All these questions are fair and they are additive to the uncertainty premium.
Italy may have a difficult issue when it attempts to roll its present debt, and that debt roll of maturities is coming up very quickly. However, with the help of the European Central Bank (ECB) Italy is likely to have some market access and be able to roll that debt on the heels of budgetary action
How will it roll? What will the yields be? These and more questions await answers.
Another crunch is coming up on for the debt roll of Greece. That is why the referendum threat dates were December 4 and December 11: the second half of December is when Greece must roll billions of euro-denominated debt. The authorities in Europe know they need sufficient structure in place so that this debt can roll without market access by Greece. Greece has been shut out of market access. The market believes it is an insolvent sovereign. In addition, there are the continuing operational demands for cash by the Greek government. This money will be provided with institutional lending, through one of the forms we presently see discussed.
Does this mix of European debt roll condemn the US to a recession? We think not.
The United States is not in recession. It is in a very slow-growth environment. Uncertainties are very high and uncertainty premiums are large, but decisions about US portfolios are based upon whether you are betting on recession, or slow growth.
If it is slow growth, stocks are inexpensive and markets are headed higher. That is the position of Cumberland Advisors. If a double-dip recession is coming, then stocks are headed lower and you should not own them.
The course of action to take in global portfolios is a different matter. In our global multi-asset class, we have taken our precious metal positions to 6% of the total deployment. That is very, very high and it is a considerable overweight for us. Precious metals are a tiny weight in global asset allocation under normal circumstances. We use several ETFs to reach that position, and they reflect an amalgamation of precious metal exposure.
We have this precious metal weight very high because, we are able to see a monetary policy transmission effect that reaches into precious metals. That supports our view that precious metals are likely to be priced higher in US dollar terms in the future. There is a considerable time lag between central bank actions and monetary effects and resultant higher precious metal prices; we measure that somewhere between nine and eighteen months.
We do not find the same relationship with commodities. Commodities are driven by other extensive factors in addition to liquidity flows from the creation of credit. Central bank balance sheet expansion has a weak link to commodities in this current environment, where central banks are attempting to provide as much liquidity as possible to avoid systemic meltdown.
When it comes to global stock markets, our international positions in Europe are far below the 24% weight that Europe holds in the benchmark index. Our exposure is limited to Germany, France, the Netherlands, and a broader-based international ETF. For Europe as a whole, we are very much underweight. In our international models, that weight is 11%, with all of it in Northern Europe.
In our global multi-asset class, we have only 3% exposure to the Eurozone stock markets. So clearly, we have a bias against Europe and in favor of other locations around the world, as well as other asset classes. In our global multi-asset class, we have 6%, or twice the exposure, in precious metals than we do in the stock markets of the Eurozone. That is a remarkable statement to make. It reflects the high degree of uncertainty given the times we are experiencing.
David R. Kotok, Chairman and Chief Investment Officer
Posted: 11 Nov 2011 05:00 PM PST
How to Honor Veterans on Veterans' Day: End the Wars and Restore Liberty, Justice and Opportunity for the 99%
Soldiers Want the Wars to End
I wrote the following on Veterans' Day 2008:
(The troops want to come home, and the American public want them to come home as well.)
Veterans' Day Began as a Pledge to End ALL Wars
David Swanson notes that Veteran's Day began as a pledge to end all wars:
Given that war is a racket that only benefits the 1%, we should honor the original intention of Veterans' Day.
Veterans Are Part of the 99%
I pointed out last week:
Police have been beating and harassing veterans.
If we want to honor veterans, we should stand with them as they fight for liberty and justice for the 99%.
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